Renewable Energy Certificates

Renewable Energy Certificates (RECs), sometimes referred to as Green tags or Renewable Energy Credits, represent proof that electricity was generated from an eligible renewable energy resource and was fed into the electric grid.

RECs provide a mechanism for the purchase of renewable energy that is added to and consumed from the grid. These certificates can be sold or traded and the owner of the REC can claim to have purchased renewable energy. RECs represent the environmental attributes of the power produced by renewable energy projects and are sold separately from commodity electricity. While carbon emissions trading programs might use penalties and/or incentives to achieve emissions targets, RECs simply incentivize carbon-neutral clean energy by providing a production premium to electricity generated by renewable sources.

So any consumer can pay for clean power, even if their electric utility doesn’t provide that choice. There are even programs that allow customers to buy a significant percentage of clean power without any additional cost.

A green energy provider (such as a wind farm) is credited one REC for every 1,000 kWh of electricity it produces. A certifying agency, such as Green-e Energy, gives each REC a unique identification number to make sure it doesn’t get double-counted. The clean electricity is then fed into the grid, and the accompanying REC can the be sold on the open market. Once the REC is used by an end-user or utility, the REC is said to be retired and may not be sold, donated or transferred to another party. No other party than the owner may make claims associated with retired RECs.

Programs to pay for clean power are simple, even though the electric grid is complex.

Energy from any generation source connected to the electric grid is bought and sold with contracts specifying the generator and the purchaser. In the trade of renewable energy, RECs specify that a unit of renewable energy was generated. Because once electricity is placed on the grid, it mixes with electricity from multiple sources and becomes indistinguishable, RECs are used to track the ownership of the environmental and social benefits of the renewable energy. The majority of RECs are sold separately from the electricity itself. In these cases, the electricity is sold as energy without its environmental and social benefits as if it were generated by conventional sources such as fossil fuels. RECs allow for purchasers to support renewable energy generation and allows the economic forces of supply and demand to further spur the development of renewable energy generation. Source: Wikipedia

All of this means consumer choice can help drive the grid towards cleaner, domestic sources of renewable energy and consumers can continue to pay the same cost for power.